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Target. The total claimed by petitioners ($2,800,000) was
allegedly based on calculations conducted by E&Y at the time of
the exchange. No documents related to that analysis were
proffered as evidence. Respondent’s total basis from Excellence
($1,427,039) was explained by stipulation as:
$50,000 Initial investment
312,699 Income from FYE 1994
807,012 Income from FYE 1995
257,328 Income from FYE 1996
According to stipulation, 25 percent of the Excellence stock was
exchanged for Alofs and 75 percent for Target.6
As a threshold matter, it should be observed that both
sides’ computations are problematic when considered vis-a-vis the
record in this case. Many of the components claimed by
petitioners are unsubstantiated by any documentary evidence, and
what explanations were offered at trial and on brief are opaque
and rambling. Respondent’s calculations, while giving an initial
impression of precision, take on a seemingly inexplicable
randomness when evaluated in light of the underlying record.
6 While the parties’ stipulations to some extent separate
allegations pertaining to Alofs and Target, their discussions at
trial and on brief generally address the matter of basis in the
two entities in a collective sense. The evidence in the record
also typically does not make a distinction. For example, the $6
million loan was to be used to purchase the stock of Alofs and
Target, not just Alofs as the stipulations would suggest.
Accordingly, the Court’s discussion to follow will likewise
proceed in a generally collective fashion.
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